Coffee prices turn bullish

Prices of Indian coffee, especially the Arabica parchment A, Arabica cherry AB and Robusta cherry AB, which reflect global prices, are on the rise.

Prices of Arabica parchment A were up 8.3 per cent to Rs 113.01 between January and August this year compared with the rates in the same period last year. Arabica cherry AB saw a rise of 9.8 per cent to Rs 93.93 and Robusta cherry AB was up 26.10 per cent to Rs 74.01 during the period under review.

However, exports have been declining. Between April and mid-September, the country's exports declined 23.2 per cent to 96,964 tonnes. In value terms, the realisation was down 10.4 per cent to Rs 854.78 crore during the period, mainly due to a sharp appreciation of the rupee. On the production front, heavy rains during July and August and the attack of white stem borer played havoc in the coffee-growing regions of Karnataka.

The twin blow (rain havoc and white stem borer) is likely to take its toll on the total coffee output to the extent of 8 per cent to 9 per cent. The Coffee Board is currently conducting a detailed study to determine the extent of the crop damage during 2007-08. According to the Coffee Board, post-blossom production for 2007-08 is estimated at 2.91 lakh tonnes compared with the final estimate for 2006-07 at 2.74 lakh tonnes, a growth of 6.20 per cent.

The crop year 2007-08 has already commenced in many coffee-producing countries and importantly in Brazil, where latest estimates (according to Conab) place the production at around 32.1 million bags. Considering the lower production expected from Brazil, the global production during 2007-08 is likely to touch 112 million bags.

Speaking on the United Planters' Association of South India's (Upasi) submissions to the government, C P Kariapa, vice-president of Upasi, said, "The planters' body has highlighted to the empowered committee of state finance ministers of the need to cut VAT (value-added tax) rate on coffee powder and French coffee from 12.5 per cent to 4 per cent. We highlighted that the higher tax rate would result in a higher consumer price, thereby adversely affecting coffee consumption. We have also urged the government to take up rehabilitation package for debt-stressed farmers of 25 districts in Andhra Pradesh, Karnataka and Kerala at a greater speed."